Amadeus It Group Sa Ord

Welcome to the Amadeus first quarter 2022 presentation webcast. The management of Amadeus will run you through the presentation, which will be followed by a question and answer session. You can ask a question on the phone by dialing star 11 on your telephone keyboard at any moment during the presentation. I am now pleased to hand over to you, Mr. Luis Maroto, President and CEO of Amadeus. Please, sir, go ahead.

Good afternoon. Welcome to our first quarter results presentation. Thank you very much for joining us today. Here with Till, I will start, as usual, with an overview of our most important developments in the quarter until we elaborate on the key financial aspects. We'll start with slide four, please, for an overview of our performance over the period. In the first quarter of the year, the airline industry continued to make progress. Global air traffic further recovered and capacity and load factors continued to increase. Global domestic air traffic approached 2019 levels supported by travel policy loosening in China. Global international traffic also improved, although more modestly than domestic traffic led by the Asia-Pacific region. In this context, Amadeus' financial performance continued to strengthen. Group revenue increased by 43% over prior year, EBITDA grew 72%, and adjusted profit expanded by 188%. This positive development was supported by the strong evolution in Earth Distribution and Hospitality and others. Our free cash flow amounted to $273 million, supporting net financial debt of $2 billion at the end of the quarter, which represented 1.1 times last 12-month EBITDA. As we advance, we have remained highly focused on our R&D efforts over the quarter to support future growth levers, including the evolution of our hospitality platform, our partnership with Microsoft and our shift to the cloud, the implementation projects of new customers across our businesses, NDC-related solutions and capabilities, including our next-generation airline retail offering and the Offers and Order Initiative, and portfolio enhancement and expansion, including airline IT digitalization and enhanced shopping and retailing, and the evolution of our portfolio for travel sellers, airports, and in payments. Please turn to slide five for an overview by segment, starting with air distribution. In the first quarter of this year, we signed 20 new contracts or renewals of distribution agreements. We continue to advance with our NDC strategy. We sign agreements for NDC contact with airlines such as Air Canada, Virgin Atlantic, and SAS, as well as with distributors such as Air Ticket and Avoris Corporación Empresarial. Additionally, American Express Global Business Travel will pilot the French KLM NDC content through the Amadeus travel platform. Finally, we continue expanding our portfolio of corporate customers with several signatures for Citrix EC during the quarter. To review our volumes evolution, in the first quarter, Amadeus bookings were 32.8% higher in the first quarter of 2022. Please note that given the recovery experience by the travel industry throughout 2020, to 2023's booking growth rates versus last year will slow down in the coming quarters. Our booking performance in the first quarter was minus 25% relative to the bookings in the first quarter of 2019, outperforming the industry supported by market share gains and representing a 3.2 percentage points improvement over the four quarters performance. Our worst performing region was North America. Central Eastern Europe and Asia-Pac were the regions reporting the highest growth booking performance improvements over prior work. Into April and May, we continue to see an improvement in our bookings evolution. Please turn to slide six to review RIT solutions. In R&IT, Etihad Airways and ITA Airways migrated to Altea during the quarter, implementing the full Altea suite, and in the case of ITA, the carrier also implemented our digital experience suite, along with other Amadeus merchandising, NBC, and data solutions. In April, Hawaii Airlines also migrated to Altea. There are several upselling wins in the quarter with Southwest Airlines, Spirit Airlines, SAS, Egyptair, and Fiji Airways. In Airport IT, we continue to expand our reach through new agreements with several players, including Hamburg, Pristina, and Western Sydney International Airports, and Greek ground handler, Alicia. To review our volumes performance in the quarter, Amadeus PV were 55% higher in the first quarter of this year than in the same period of last year, driven by continued progress in the travel industry and new customer implementations. Please note that given the recovery experience by the travel industry throughout 2022, 2023 PVs growth rates versus 2022 will slow down in the coming quarters. Relative to the first quarter of 2019, Amadeus PVs were minus 6% versus that year, the first quarter, up 9.5 percentage points improvement over past quarter's performance. Organic growth was minus 7.7 relative to the first quarter of 2019, advancing notably versus prior quarters supported by enhanced performance of Altea and most notably Naviter, 12.4 points quarter over quarter organic performance improvement. North America continues to be our best performing region. ACIAPAC reported a notable growth versus 2019 improvement in the first quarter relative to prior quarter and represented 32% of Amadeus PVs, our last year's region in terms of PVs. Into April and May, based on the most recent data that we have, our organic PV performance versus 2019 has continued to progress. Please turn to slide 7 for an update on our hospitality segment. first quarter of the year, our hospitality and other solutions revenue was 31% higher than revenue in the first quarter of 22. Both hospitality, which generates the majority of the revenues in the segment, and payments delivered strong growth versus the first quarter of 22, supported by new customer implementations and volume expansions. We saw continued interest from customers across our hospitality portfolio during the first quarter of this year. With this I will now pass on to Thiel for further details on our financial performance in the quarter.

Thank you, Luis. Hello, everyone. Please turn to slide 9 to review our revenue performance in the period. In the first quarter of 2023, our group revenue grew 43% versus Q1 2022, supported by revenue growth across our segments. In air distribution, revenue in the quarter was 52.2% above 2022, primarily driven by the bookings evolution Luis described, and by a revenue per booking, which was 14.6% higher than in Q1 2022, driven by a lower weight of local bookings in the first quarter of 2023 compared to 2022, and pricing effects, including impacts from inflation and yearly price adjustments. With regards to AIIT solutions, revenue in the quarter was 35.7% higher than in Q1 2022, driven by the PB volumes evolution, coupled with a 12.5% lower revenue per PB. The decrease in the revenue per PB in the quarter was expected and was fundamentally driven by a proportion of AIIT revenues not linked to PBs growing healthily, but at a softer growth rate than PBs, more than offsetting positive pricing impacts from inflationary or price adjustments and from upselling of incremental solutions. To briefly recap on the implementation front, in line with plan as of now, we've implemented Etihad Airways, ETA Airways, and Hawaiian Airlines, and continue working to implement Allegiant and Bamboo Airways during this year, also in line with plan. And as we said in February, this should bring us an approximate incremental 45 to 55 million passengers boarded in 2023, resulting from the 2022 and 2023 migrations. Let me remind you that this is off a 2022 PB base, reduced by the Russian carrier demigrations, which in 2022 brought us 25 million passengers boarded. Regarding hospitality and other solutions, revenue in the first quarter was 31.3% above Q1 2022, driven by strong performances of both hospitality and payments on the back of new customer implementations and volume expansions. At Hospitality, its three main revenue lines reported double-digit growth rates in the quarter versus Q1 2022. Within Hospitality, Hospitality IT growth was mainly driven by sales and event management, service optimization, and Amadeus CRS revenues supported by new customer implementations and higher reservation volumes. Media and distribution revenues continued to advance, backed by an increase in media transactions and bookings, And business intelligence also progressed, driven by new customer implementations. Please now turn to slide 10 for a review of our EBITDA evolution. In the first quarter of 2023, our EBITDA amounted to 510 million euro, 72.3% higher than in 2022. EBITDA margin expanded by 6.6 percentage points to 38.9%. And the EBITDA performance resulted from the revenue evolution explained before, a higher cost of revenue and an increase in our combined personnel and other operating expenses cost lines. Cost of revenue grew by 59.7% in the quarter versus the same quarter of 2022, resulting from volume expansion across our segments, particularly in air distribution, in our media and distribution hospitality businesses, and in the B2B wallet payments business. Cost of revenue was also impacted by several factors, including customer country and business mixes. Our P&L fixed costs in the first quarter of 2023 compared to the same quarter last year were 14% higher. This cost evolution resulted from, one, increased resources, particularly in our development activity, to support our R&D investment, as Luis has described, coupled with a higher unitary cost resulting from our global salary increase. Two, growth in non-personnel related spend, like travel and training, among others, driven by the business expansion relative to prior year. And three, higher transaction processing cost caused by the volume expansion and our shift to the cloud. Let me remind you what we said in February. Our P&L fixed cost growth in 2023 should range between 10% to 14% over 2022, excluding the €51.2 million government grant received in 2022. Additionally, this cost growth in 2023 from a quarterly perspective will be higher in the first half of the year and slower in the second half. Please bear in mind that next quarter when we report our figures, we will be comparing against the cost and EBITDA base, which benefited from the government grant received in Q2 2022. So we will show you our performance with and without this non-recurring effect. To review the evolution below the EBITDA line briefly, in the first quarter of 2023 compared to 2022, E&A expense decreased slightly by 1.1%, with a lower depreciation expense from a reduction in hardware investment, largely driven by our shift to the cloud, offsetting higher amortization expense from internally developed assets. Net financial expense also declined in the period by 53.1%, driven by an increase in financial income and exchange gains and a reduction in other financial expenses. Interest expense was 5.8% higher, caused by a higher average cost of debt relative to last year despite a lower gross debt. Income taxes increased by 202% in the quarter versus the same quarter of prior year driven by higher taxable income. As a result of these effects, adjusted profit grew by almost 188% in the first quarter versus 2022. Please turn to page 11. to review our R&D investment and CapEx. R&D investment grew by 26.4% in the quarter versus 2022. As Luis has described, we are investing for the future and focusing on several strategic areas and new customer implementations. In the first quarter of 2023, our CapEx increased by 31 million euro or 26.7% compared to the same quarter in 2022 mainly driven by higher capitalized R&D investment and represented 11.4% of revenue. Please turn to slide 12 for a review of our free cash flow and leverage. With regards to free cash flow, we generated €273 million in the first quarter, which is 117% higher than the same quarter of last year, excluding implementation costs paid in the first quarter of 2022 of almost 18 million euro, growth in the quarter was 90.2%. This progress is fundamentally explained by our EBITDA evolution, by a change in working capital outflow as expected, and higher capex and taxes. Free cash flow generation in the quarter supported our net debt evolution. Net debt amounted to 2.026 billion euro at the end of March and with a leverage amounting to 1.1 times net debt to EBITDA. For our expected Q2 2023 free cash flow evolution, please take into account, as I mentioned before, we have a non-recurring benefit in the base from the €51 million government grant we received one year ago. Also, as we advanced in February, cash taxes in 2023 are going to have a higher impact in our free cash flow generation than in 2022. This is as expected, and it does not change our free cash flow outlook for 2023. And with this, I pass back to Luis for final remarks.